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TMI Blog2016 (2) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the reliance placed by the assessee as the facts of the case of the assessee are different to that of those cases. e. Any other ground that may be urged at the time of hearing." 2. Brief facts of the case, are that the assessee is a proprietor of M/s. Sri Vinayaka Traders, filed his return of income for the A.Y. 2008-09 on 28/09/2008 declaring total income of Rs. 10,47,240/-. The Assessing Officer, completed the assessment under sec. 143(3) of the Act on 12/05/2010 and determined total income of Rs. 12,37,439/-, besides agricultural income of Rs. 1,70,000/-. The Addl. CIT, Range-2, Vijayawada initiated penalty proceedings under sec. 271E of the Act, for contravention of the provisions of sec. 269SS of the Act. The Assessing Officer was of the opinion that the assessee has violated the provisions of sec. 269SS by accepting the loan in excess of the specified amount as per sec. 269SS, hence, issued a show-cause notice as to why penalty under sec. 271D shall not be levied for the said violation. In response to the show-cause notice, the assessee's Authorized Representative appeared and filed written submission, wherein the assessee has contended that the loan accepted by him f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,47,287/- which is the opening balance brought forward from the earlier years and the balance amount of Rs. 6,25,875/- was the loan accepted during the year by way of account payee cheque or bank transfer. The assessee further submitted that the transactions taken place between husband and wife and also the transactions are made through banking channel by way of money transfer from one bank to another, therefore, there is no contravention of sec. 269SS of the Act, to levy penalty under sec. 271D of the Act. 4. The CIT(A) after considering the explanations of the assessee, deleted the penalty levied by the Assessing Officer. While doing so, the CIT(A) held that in this case, the loan was accepted by way of a journal entry through book adjustments between the husband and wife, therefore, violation of sec. 269SS does not arise. The CIT(A) further was of the opinion that payment of loan or deposit by way of book adjustment in the form of journal entry in the books of accounts of the assessee would not attract the provisions of sec. 269SS, consequently, penalty under sec. 271D is not leviable. In support of his claim, the CIT(A) relied upon the Hon'ble Delhi High Court's judgment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of two accounts belonging to one person is only an accounting treatment of transactions and it does not amount to repayment of loan as there was no exchange of money in cash between the two parties. The A.R. further submitted that the said loan amount of Rs. 21,73,162/- is consisting of Rs. 15,47,287/- which is the opening balance brought forward from the earlier years and the balance amount of Rs. 6,25,875/- was the loan accepted during the year by way of account payee cheque or bank transfer, which was misread by the A.O. The assessee has not accepted any loan or deposit in excess of the limits specified under sec. 269SS, so as to levy penalty under sec. 271D of the Act. In support of his contentions, the Authorized Representative of the assessee relied upon the judgment of Hon'ble Andhra Pradesh High Court in the case of Gururaj Mini Roller Flour Mills vs. Additional Commissioner of Income-tax vs. ACIT (2015) 56 taxman.com 336. 7. We have heard both the parties and perused the materials available on record. The Assessing Officer levied penalty under sec. 271D of the Act for violation of the provisions of sec. 269SS. The Assessing Officer was of the opinion that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has not accepted any loans or deposit by cash in contravention of sec. 269SS of the Act. The Assessing Officer without examining the details furnished by the assessee, simply on suspicious and surmises, come to the conclusion that the assessee has accepted loan in cash, thereby violated the provisions of sec. 269SS of the Act so as to levy penalty under sec. 271D of the Act. 9. The question whether there was a reasonable cause, because of which the requirement of concerned provisions could not be complied with is primarily an essential question of fact and it has to be decided in each case on consideration of material placed before the concerned authority. The levy of penalty under sec. 271D of the Act is not automatic. Before levying penalty, the concerned officer is required to find out that even there was any violation referred to in the said provisions and the same was without a reasonable cause. The initial burden is on the assessee to show that there exists a reasonable cause, which was the reason for the failure referred to in the concerned provisions. Therefore, the Assessing Officer dealing with the matter is to consider whether the explanation offered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncern without making payment of cash, could not said to be violation or contravention of sec. 269SS and 269T of the Act. The relevant portion is reproduced hereinunder:- "8. The cash transactions by the assessees or the public in general were treated as one of the devices to create black or unaccounted money since it becomes difficult to verify the same. As a step to curb this, Parliament amended section 40A of the Act by introducing sub-section (3). It mandates that where an individual incurs expenditure exceeding a sum of Rs. 20,000, payment thereof shall be through crossed cheque, or demand draft, and any deviation therefrom shall entail in denial of reduction to the extent of 20 per cent. Further steps in that direction were taken by introducing Chapter XX-B, through the Income-tax (Second Amendment) Act, 1981. This Chapter comprises sections 269SS, 269T and 269TT. Corresponding provisions in Chapter XXI relating to penalties were also included and came to be renumbered as section 271D and section 271E. 9. Section 269SS prohibits any person from accepting loan or deposit, otherwise than by an account payee cheque or draft, if the aggregate of the amount exceeds Rs. 20,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment is to a person by name Smt. Sarada Mohan. The plea of the appellant was that the alleged payments, in favour of M/s Yellaiah Gupta, or receipts from it are nothing but book adjustments that too in the light of dissolution of a firm, by name, M/s. Venkateshwara Rice Mills. The payment to Smt. Sarada Mohan is said to be an account of the death of her husband, who was a legal advisor to the appellant. Though at the stage of passing of orders under section 143(3) of the Act these contentions were accepted, they were disbelieved, at a later stage. 12. Receipt of Rs. 20,000 or more, in cash, or payment of the same to a depositor, in a sum, exceeding Rs. 10,000, is not only prohibited but also visits the assessee with penal consequences. The assessee accused of violating it would be exposed to the penalty of equal amounts. The other general penalties in the Act may also be in store. Therefore, it is only when the ingredients of the provisions of the Act are proved to be existing that the penal action can be taken. Section 269SS can be said to have been contravened, if only it is established as a fact, that certain amount, exceeding Rs. 20,000 was received as loan or deposit, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposed, as a matter of course. 16. Making book adjustment of the funds, by a firm vis-a-vis its sister concern, can by no means be said to be the one taken in clear violation or contravention of the said provisions. It is only when an assessee has taken a decision to mobilise loans or deposits and in the process it has received amounts exceeding Rs. 20,000, otherwise than through cash that the contravention can be said to have been taken place. 17. Similarly, section 269T can be said to have been violated if only the repayment to a depositor or a loanee exceeding a sum of Rs. 10,000 was made otherwise than through crossed cheque or demand draft. In the instant case, the Assessing Officer did not identify the loanee or depositor and has simply invoked the provisions in relation to an internal financial adjustment among the firms. 18. Therefore, this court is of the view that the acts and omissions attributed to the appellant do not constitute violation of sections 269SS and 269T, and if for any reason, such contravention is noticed, it stands condoned under section 273B and thereby, the proceedings initiated under sections 271D and 271E of the Act are declared as untenable. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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